Did the US reach a bottom and is starting to set the base for rising that is what we are to experience. Bernanke said that rates now are accommodative to stimulate growth, favoring with that a strong dollar to withhold some of the pipeline pressures, while he before that noted that further weakness will prevail in the labor market so which scenario are we to see today as it will be the defining ballot for the upcoming market sentiment and dollar headings.
US employers are projected to have shed 60 thousand jobs in May after the less that expected loss of 20 thousand jobs seen in April. The wider household survey that is the official unemployment rate it's projected to edge higher to 5.1%. As for employees status average hourly earnings are also expected with a slight rise with 0.2% on the month while unchanged on the year at 3.4% as their average weekly hours are expected to remain unchanged at 33.7.
Preparing us for the big report we had to gather pieces from here and there, as so far no other indicator was close enough to actually reflect the true state of employment in the economy. Starting with the manufacturing sector which contracted on a less than expected pace, yet the sector is still laying off employees as they index though ticked slightly higher with 0.1 to 45.5 its still deep below 50 and the sector is suffering with high inventories, rising prices, and sluggish domestic demand which confirms the ongoing still weak trend in the sector.
As for the services sector, which has been the largest contributor in jobs and to the economy as a whole, the ISM was better than expected also yet added less jobs which was a very bad indicator for today's payrolls, as it actually contracted at 48.7 from 50.8 especially if we take into consideration the financial sector that has announced massive job cuts in action to trim its expenses to help in recovering their ailing financial balances.
As for the ADP report that yet has not proved its credibility in predicting the actual nonfarm it reported 40 thousand added jobs after a strongly revised previous to 13,000 added in the private sector. While if we compare that to the ISM indices it sounds extremely ambitious as they are more accurate and reflecting to the state of employment in the sectors than the ADP report.
For the final piece of information, we are to look at the less volatile initial claims four-week average which actually was down by 2,750 to 368,500 yet still that is very low to be a much positive impute for today's employment figures. While if we take the continuing claims the four-week average rose 15,250 to 3.08 million which supports mainly the rise to be seen in the unemployment rate.
Now, since we have dived through the details let's look at the picture in and aggregate economic perspective. The labor market is sometimes considered a lagging indicator for their growth comes actually after the sectors themselves adapt to the change in the economic cycle. Now since confidence is still low from businesses perspective then they are surely not eager to higher more employees since their potential returns are low and noting the ongoing tight liquidity that limits expansion opportunities.
All related aspects to the housing sector from construction to realtor and lenders are all still trimming massive jobs as no bottom is foreseen till now, while that is adding further woes to the economy. In a typical slowdown scenario the economy sheds around 2 million jobs and already nearly a quarter of a million have been lost already this year in the US, so still as much as the data come in better than expected today the weak downside trend is surly believed by all participants to prevail.
The most on stake here today is the dollar trend. The data today is the last impute to confirm the actual state of economy, noting especially that it correlates to potential growth and consumer consumption which accounts for nearly two thirds on the economic output. Fed's chairman comments are to be in question today for shall the labor market continue shrinking well means sluggish growth is further to drag and with inflation rising then we are back to the stagflation scenario and that will drag the dollar to its lows again, while if the data reflected with revisions to the previous month a light at the end of the tunnel a rate hike scenario will be in play as the economy will be believed to start gathering the pace to rise and that dear reader is a surely bullish dollar scenario.
All options are laid for you now to assess and believe it sincerely that the dollar's trend is mainly to be defined today according to those figures, so stay locked in your seat for you do not want to misinterpret the market sentiment to be...